Chaco Issues Update on Operations in Paraguay, Colombia

Chaco Resources Plc, an oil and gas explorer and developer focused
in South America, announces an operations update on its prospects in Paraguay
and Colombia.

PARAGUAY
Curupayty Block (Chaco Equity 100%)
Reprocessing of existing seismic lines commenced in late March and is proceeding on schedule for completion in early July. Interpretation of the seismic is then scheduled for July and August. With interpretation complete the company will
then review the results and decide whether to proceed to drilling or proceed
with a farmout campaign.

San Pedro Block (Chaco Equity 100%)
Data collection is continuing prior to commencement of seismic re-processing.
Some difficulties were encountered in locating the old seismic tapes but these
have now been located in the U.S. and are currently being copied.

Canindeyu Block (Chaco Equity 100%)
This block is still pending award from the Paraguayan Government.

COLOMBIA
Platanillo Block (Chaco Equity 25%)
Joint venture (JV) meetings have been held recently with the operator, Ecopetrol, and
the operating team put in place. Rig availability is currently being evaluated
and seismic re-processing of Alea data is about to begin. Ecopetrol has
offered the JV a drilling slot in its current contract with a helirig
but is also seeking a cheaper option. Re-entry of Alea 1 is scheduled to
commence in fourth quarter 2006. In the interim the environmental impact study is
underway.

Puerto Lopez Oeste Block (Chaco Equity 54%)
Re-processing of existing seismic data commenced in late March. Preliminary
indications are that a Mirador stratigraphic trap is not present, but a
conventional Mirador fault play has been indicated in the block. Further
re-processing of the data and final interpretation will be required before the
size and shape of this feature can be determined. This is scheduled to be
completed in late July.

After the interpretation is complete the JV
will then program and shoot a minimum of 100 kilometers of new 2D seismic to properly
delineate the prospect. This is likely to occur in August and September, with
processing and interpretation to follow in October. The nearest Mirador fault
trap is the Apiay Field of approximately 100 million barrels located roughly 80 kilometers west of the
Puerto Lopez Oeste Block. A decision whether to proceed into the next year and
drill one well is required in December.

Primavera Block (Chaco Equity 55%)
The Primavera E&P Contract was signed by the operator, Argosy Energy
International, on May 9, 2006. This block covers an area of approximately
146,000 hectares in the northeastern part of the Llanos Basin.

Ten undrilled leads and structures have been previously mapped in the block, with
indicated areas of closure ranging from 4 to 40 square kilometers.Re-processing and re-interpretation of seismic will be required to confirm this mapping.

A number of wells were drilled some years ago immediately to the east of the
Primavera block, all of which appear to have been off-structure and most of which
appear to have been prematurely terminated above the prospective Mirador
reservoir. Many of these wells had oil shows and one, El Miedo 4, did not reach
the Mirador Formation but recovered 97 barrels of 19°API oil from the Carbonera
Formation, an Eocene Formation that overlies the Mirador.

The main Mirador reservoir of Eocene age lies at a depth of less than 4,000 feet
in the block, and after mapping is complete two structural targets will be
selected for drilling commencing late in 2006.